Efficient Systems for the Securities Transaction Industry - A Framework for the European Union

This paper provides a framework for the securities transaction industry inthe EU to understand the functions performed, the institutions involved andthe parameters concerned that shape market and ownership structure. Ofparticular interest are microeconomic incentives of the industry players thatcan be in contradiction to social welfare. We evaluate the three functions andthe strategic parameters - the boundary decision, the communication standardemployed and the governance implemented - along the lines of three e±ciencyconcepts. By structuring the main factors that in°uence these concepts andby describing the underlying trade-o®s among them, we provide insight intoa highly complex industry. Applying our framework, the paper describesand analyzes three consistent systems for the securities transaction industry.We point out that one of the systems, denoted as 'contestable monopolies',demonstrates a superior overall e±ciency while it might be the most sensitivein terms of con¯guration accuracy and thus di±cult to achieve and sustain.